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Friday, 26 January 2018

People could
be forgiven for thinking that little has been happening with Brexit recently,
and for that matter for feeling relieved that other matters have dominated the
news. But whilst it’s true that substantive political negotiations won’t begin
again until March, beneath the surface there is a great deal happening which
will shape what happens then. In particular, as
Ian Dunt has written on politics.co.uk, the EU-27 are busily agreeing and
framing what will become the Commission’s negotiating mandate for Michel
Barnier for the phase 2 talks.As
the leaked text shows, this mandate, as with that for phase one, will be tightly
drawn and will set the agenda not just for Barnier but for the talks and for
their likely outcome, including the way that any transitional period is
configured. There are reasons for this, as there were for what happened in phase one. On
the one hand, the very fact of the timeframe of Article 50 and the relative
negotiating power of the EU-27 would in any circumstances put the UK in a
fairly tight corner because of the ever-present danger of a no deal crash and
burn. That will be even more true for phase two, because the issues involved
are more complex and the time frame that much tighter. On the other hand, and
there is nothing inevitable about this, the British government is still
flailing around unable to agree its own position or even, apparently, to
understand what a viable position would look like. That creates a vacuum which
magnifies the already extensive power of the EU-27 to shape what happens.In effect,
what is happening is that Britain is still engaged in debating the meaning,
nature and consequences of Brexit. Indeed in many ways we are only now having
the kind of debates we should have had before the Referendum. In the absence of
clarity, we are almost back to the days of ‘Brexit means Brexit’ in which it’s
necessary to engage in ‘Kremlinology’ to try to work out what, if anything, is
going on beneath the surface. As far as can be made out, the current
biggest fault line in the government is about whether to seek a customs treaty
with the EU, and if so how extensive a one (it is a
persistent misnomer that the UK could ‘stay in the customs union’ whilst
not being a member of the EU: the issue is what kind of treaty, if any, to have).The CBI made a high profile
intervention this week in favour of a customs treaty that effectively
replicates the current customs union. The timing of this was no accident – it reflects
something that I
have been writing on this blog for some time months now: we are now getting
very close to the point where companies will have to start finalising
investment and location plans in preparation for March 2019. The CBI initiative
was a cue for the predictable,
full-throated, fury of the Brexit Ultras, not least because such a customs
treaty would preclude their shibboleth of being able to make independent trade
deals. Indeed, it is striking how it is this rather than immigration which has
now become totemic for Brexit politicians. It is doubtful if the same is true
for many who voted leave.In any case
it is something which has little obvious economic merit since being in the EU
does not preclude trading with rest of the world, in part through EU free trade
agreements, and any new agreements the UK signs would be unlikely to compensate
for the trade lost by leaving the single market. David
Davis’ insistence today that Britain should be able to conduct trade talks
during any transition period is especially empty since, even if the EU agreed,
no country is going to enter into substantive trade talks until the future terms
of UK-EU trade are settled. The real issues for trade posed by the EU’s phase
two guidelines are, first, what will happen to British access to the EU’s third
country agreements – they do not automatically continue for the UK, and whether
or not they do will depend in part on those third countries – and, second,
that the proposed end to the transition period of December 2020 makes it too
short. But these practicalities are ignored in favour of the purely symbolic demand
for an independent trade policy.Equally impractical
is the objection that a comprehensive customs treaty would mean the whole of UK
business being bound by EU ‘red tape’ when most British firms do not trade with
the EU or anyone else. Alas, such a view fails to understand that far more red
tape is involved in having two sets of regulations, one for those which trade
with the EU and one for those who do not, and the far greater red tape entailed
in trading with the EU from outside the single market and customs union.
Meanwhile, the Brexit vote continues to take a steady toll on business, with Jaguar
Land Rover announcing cuts in production in part as a result of Brexit.But the days
when the Tory Party was the party of business seem as remote as when the Church
of England was the Tory Party at prayer. Symbolism is, indeed, now the Brexiters’
stock in trade. Rather than propose any remotely workable plan for Brexit they
obsess about the colour of passports or, this week, the crucial issue of whether
Big Ben will ring out the bells of freedom on Brexit day. That’s all so
much easier than boring things like Rules
of Origin, or what Most
Favoured Nation actually means (hint: the clue, for once, isn’t in the
name). It’s a deep irony that many of those who most ferociously denounce
‘identity politics’ are currently its most enthusiastic proponents.Insofar as
the Brexiters do have a discernible position, it seems to be stuck at cakeism,
hence their great joy at the (mis)reports that President Macron had held out
the possibility of a ‘bespoke deal’ for Britain. For Brexiters, that’s code for
cake. Unfortunately for them Macron didn’t actually say this, and the position he set out
was no different to what the EU has been saying since long before the
referendum, and which is in any case logically entailed by the nature of the
single market. You can either be in it or out of it. If you’re out of it, you
have less good terms of trade, especially for services and most especially for
financial services. That circle can’t be squared, any more can the one that
says that if there to be a transition period whilst still in the single market
and customs union that means being in with all that is entailed in terms of
freedom of movement, ECJ, Common Commercial Policy.So far as
can be seen, the government are inching towards accepting all of this, both as
regards a transition period and what can realistically come afterwards (and
certainly bullish talk of no deal being better than a bad deal seems to have
become very muted). But, if so, then they can’t say it for the same old reason:
their Ultras won’t accept it, as their cheerleader Jacob Rees-Mogg – now the
leader of the ERG party within a party, the two previous leaders having been
promoted to Ministerial roles - has this week made clear from his apparently
permanent seat in the BBC’s studios. This sets the stage for, either, a massive
political crisis when the realities of phase two happen; or a damp squib, as
happened with phase one, with the Ultras accepting anything to get them over
the line in March 2019 without the government imploding.Meanwhile,
to the extent that the Tory leadership is softer on Brexit than its rank and
file, Labour is still stuck in the opposite position where its leadership is
taking a harder line than its membership, voters and MPs. Again, that’s a
position which is unlikely to survive for many more months and depending on if,
when and how it changes the entire domestic politics of Brexit could also
change.Thus it’s
conceivable, at least, that if the Tory rank and file force their leadership to
harden and the Labour rank and file cause their leadership to soften then the
stage will be set for a major parliamentary crisis, with a further election and
even a referendum by no means out of the question. At all events, these quiet
days at the beginning of 2018 will not be typical of the year to come.Finally,
although there is little light relief to be found in Britain’s Brexit
tribulations, there was one moment of amusement this week. David
Cameron was recorded saying that Brexit was “not a disaster” but was a “mistake”.
It is easy to see why he would not want to own to it being a disaster, of course,
given his dismal role in creating it (and to see that had he said otherwise, he
would have been lambasted for ‘talking the country down’). But it is truly
bizarre to see the glee with which Brexiters greeted this news, as if “it’s not
a disaster, just a mistake” was a ringing endorsement of Brexit. Perhaps they
should have put it in the side of a bus.

Friday, 12 January 2018

Any
expectation that the New Year would concentrate Brexiters’ minds on the
pragmatic realities of Brexit has been abundantly dashed this week, with a string
of absurdities. Yet, absurdities though they be, each of them is revealing of
some of the deep and recurring flaws within Brexit.So, first,
came the news that David
Davis had consulted lawyers as to possible legal action against the EU for
producing documents outlining the consequences of Britain becoming a third
country to the EU after Brexit (see, for example, this
one on the consequences for road transport). The legal advice, predictably,
was that there was no basis for such an action but even to entertain the idea
is extraordinary (and to which court would the case be taken? The despised ECJ
presumably). For it is an ineluctable consequence of Brexit that, in March
2019, Britain will become a third country, and a real possibility – actually welcomed
by some Brexiters – is that there will be no deal. It was even rumoured this
week, although nothing came of it, that Britain would create a Minister charged
with planning for a no deal scenario. Thus it is bizarre that Davis would think
it illegitimate for the EU to plan for this. Equally bizarre was his claim that
the EU was not giving sufficient credence to a transition (or, in Brexit-speak,
implementation) period since – apart from the fact that this is by no means
assured – the EU documents in question did, precisely, identify this as a
possibility that could mitigate or defer the full consequences of being a third
country.This piece
of nonsense was elegantly
taken apart by Jonathan Lis in the latest of his string of excellent, excoriating
articles on the government’s approach to Brexit. But in addition to the points
he makes I think this episode is a fresh illustration of something I have
written about before on this blog (in fact, it is by a long way the most read
post), namely that Brexiters
constantly talk as if Britain is being expelled from the EU rather than
choosing to leave. So the consequences are treated as if they are a punishment
for, rather than being entailed by, that choice.The notion
of punishment also formed the backdrop to the ‘charm offensive’ visit
to Germany by Davis and Philip Hammond this week. Speaking to a business
audience, Hammond argued that it would be crazy to ‘punish’ Britain for Brexit by
creating new barriers to trade between Britain and Germany (and the EU
generally) since, currently, none exist. Well, quite. But of course that is
what the government’s policy of (hard) Brexit does.In making
these arguments, and to this audience, Hammond was channelling some recurrent
themes in Brexiter mythology going back to before the Referendum. First, that
it would be possible to get round the EU-27 by dealing directly with individual
member states, especially Germany. The Brexiters in government have repeatedly tried
this ploy and repeatedly failed. Second, that German
businesses are going to come to the rescue of Brexit and force Germany and
in turn the EU to drop its defence of the integrity of the single market. They
haven’t and they won’t (because they also care about the integrity of the
single market); and moreover they can’t (because they don’t make German, still
less EU, trade policy). And, third, that existing regulatory convergence makes
a Brexit trade deal easy. It
doesn’t, because the deal is going to be about divergence, not convergence.And then the
final absurdity, Nigel
Farage’s suggestion that he was warming to the idea of a second referendum
- not on the final terms, but a re-run of the in/out choice – in the
expectation of a more emphatic vote to leave to scarify the ‘remoaners’ once
and for all. As many commentators have pointed out, this is most obviously understood
in terms of Farage’s desire to be back in the limelight and to reprise what no
doubt he considers his finest hour.But I think
there is something deeper here than Farage’s ego. There is a significant strand
of Brexiter thinking, exemplified by Farage, which is besotted with a self-pitying
sense of victimhood. For these people, winning the Referendum was actually a
catastrophe, taking away their victim status and requiring them to do something
quite hateful to them: to take
responsibility for delivering what they said they wanted and which they
claimed would be easy. It is that which accounts for the way that since the
Referendum they have continually acted as if they were still fighting it. And, more
profoundly, it directly feeds into talking about Brexit as if Britain were
being forced out of the EU on ‘punitive’ terms, thus perpetuating a sense of
victimhood. In this way, there is a seamless weave between Farage’s desire to
re-live his moment in the sun, Davis’s attempt to blame the EU for the
consequences of Brexit, and Hammond’s talk of post-Brexit trade on anything
other than near identical terms to EU membership being punitive.Until the
Referendum – or at least until the Article 50 letter – Britain could keep going
round these endless loops of brassy, breezy optimism (‘they need us more than
we need them’ and variants thereof) and sullen, lachrymose victimhood (‘ordinary
folk done down by the EUSSR and the establishment’). That won’t do now that
Brexit is happening, and happening very soon. Brexiters love to say that the
refusal of ‘remoaners’ to accept Brexit is undermining the country in the EU
negotiations but the reality is that what makes Britain ridiculous – and incomprehensible
– to the EU is, precisely, the deep-rooted inability of Brexiters to accept Brexit.For
Brexiters are no longer – if they ever were – the insurgents. Now, they drive
government policy and are in the key positions of authority to deliver Brexit.
And that has exposed both their completely inadequate grasp of the
practicalities of what Brexit means and their psychological aversion to taking
responsibility for it. Farage apparently believes that a second referendum
would deliver an overwhelming mandate for Brexit but I suspect that in his
heart of hearts he – and many other Brexiters – would prefer to lose such a
Referendum. Then, not only would all the boring practicalities of
responsibility to deliver an impossible policy be avoided but also Brexiters
could return to their comfort zone of victimhood.And if that
analysis is right, then the absurdity of Britain leaving the EU becomes truly enormous:
for it means that we are doing so against the wishes not just of remainers but
of leavers too.

Friday, 5 January 2018

The need for
realism about Brexit, suggested in my
previous post, is underscored by the report this week that Liam
Fox and the Department for International Trade are developing plans to join the
Trans-Pacific Partnership (TPP). This – like joining NAFTA or creating
hypothetical Commonwealth or CANZUK free trade areas – is the kind of idea that
surfaces from time to time amongst Brexiters on social media, but so far as I know
this is the first indication that it is being seriously considered.The
deficiencies of this idea should be obvious – there is a very big clue in the
name. Regional trade agreements make sense for countries in a particular
region, but not for countries on the other side of the world. Which is also why
the TPP countries account for a very small percentage of UK trade currently and
any further expansion by joining TPP would be trivial compared with the volume
of UK-EU trade. In any case, the EU already has actual or in progress trade
agreements with seven of the eleven TPP countries, including Japan, the
biggest. Moreover, as Samuel
Lowe argues in an article in Prospect, the TPP negotiations are already
fraught and there is absolutely no reason to think that the countries involved
have any interest in adding Britain to them, and certainly not whilst the terms
of the UK-EU relationship are unknown.In short,
the whole idea is a non-starter and its meaning, if it has any meaning, seems
only to be to avoid the reality – also mentioned in my
previous post – that Liam Fox’s role is an empty one, at least until
Britain is no longer bound by the EU Common Commercial Policy which is, at the
least, several years off. But even if TPP were a viable option for the UK, it
would only serve as a reminder of the limitations of the Brexit argument for ‘sovereignty’.
All trade deals to some extent, and regional partnerships to a much larger
extent, entail some loss of sovereignty. The ECJ is anathema to Brexiters, but
TPP (like NAFTA and many other trade agreements) will make use of
Investor-State Dispute Settlement (ISDS) systems which effectively by-pass
national courts and are beyond public scrutiny or accountability.The reality
is that you can have trade agreements, or you can have complete sovereignty:
you can’t have both. Indeed, a strong argument for the EU single market is that
it embeds regional trade within a set of publicly accountable political
institutions, including democratic institutions. Britain within the EU has far
more control of its own affairs than will the ‘Global Britain’ envisaged by the
Liam Fox and Boris Johnson version of Brexit. For that matter, the typical
requirement of modern trade
deals to liberalise immigration policy bodes ill for those who voted for
Brexit in the belief that it would limit immigration.By contrast
with the nonsense about TPP, Andrew
Duff has written an extremely interesting and incisive analysis of the Brexit
situation on Policy Network. It is well worth reading in its entirety, but
the particular aspect that caught my attention was the idea that the UK could
seek to create a form of association agreement with the EU modelled to some
degree on the Ukraine Deep and Comprehensive Free Trade Area (DCFTA).This, in
brief, would entail free movement of capital, goods, some services on a
sectoral basis potentially including financial services, but not free movement
of people; a customs agreement (including rules of origin) outside of the
customs union and the common commercial policy, as well as co-operation on
security and defence. There is no contribution to the EU budget, although
contributions are made to specific agencies and programmes such as Erasmus
(something the UK have already indicated a desire to do). I am not entirely
clear what the precise implications of a DCFTA would be for the Irish border,
but my assumption is that free movement of goods would help to resolve one of
the key aspects of this issue and that, in general terms, the closer the
partnership the softer any border would need to be. (For more detail on what the
Ukraine DCFTA involves see, apart from Duff’s excellent article, the European
Parliament’s briefing on the economic impact of Brexit, especially p. 24).Taken
together, this would seem to be something that could be called the ‘deep and
special partnership’ that Theresa May has repeatedly spoken of but without
giving concrete detail. It goes well beyond the Canada CETA both as regards
trade and non-trade issues and is more promising than CETA for resolving the
Irish border issue. The fly in the ointment for Brexiters, of course, is that
the DCFTA model gives an ultimate, albeit arm’s length, role of arbitration to
the ECJ, and a high degree of compliance with the EU acquis (and the more services sectors that get included, the higher
the degree of compliance). Clearly the Brexit Ultras will immediately reject
this model, therefore. But it is at least possible the UK government will be
more pragmatic. Such a DCFTA would give many Brexiters a lot of what they want –
including an end to free movement of people, an end to EU budget payments, and
freedom to pursue an independent trade policy – whilst being far less
economically damaging than CETA (let along no deal/WTO). In terms of ‘control’
and sovereignty, it is already clear from the phase 1 agreement on citizens’
rights that the ECJ red line will be crossed, and most likely it will also be
for participation in the various agencies. In any case, as noted above, all
international trade agreements entail compromises of sovereignty.The reality
is that if Britain is going to salvage anything from Brexit then the corner
that May’s red lines have painted us into will have to be substantially
breached. I speculated in my
previous post that they seemed to have been drawn up entirely by Theresa
May and her (pre-election) inner circle of advisers. Since then, I have been reading
Tim Shipman’s fascinating book Fall Out
(London: William Collins, 2017). In it he confirms this speculation, writing “it
is extraordinary that these, the foundational decisions of Britain’s withdrawal
strategy … were taken, in essence, by two people [May and Nick Timothy]. The
cabinet certainly had no chance to debate them” (p.12). Extraordinary, indeed –
and it would seem absurd, given all that has happened, since that they should be treated
as sacrosanct, whatever the political difficulties of modifying or abandoning
some of them. There are, after all, political difficulties in all scenarios.Of course
this is not just about Britain. As Duff explains, a DCFTA would also require some
degree of compromise on the EU side and would not automatically be available to
the UK. Still, he regards it as worth exploring as “the least bad choice”. If
by that he means, as compared with, in order, EU membership and EFTA membership
then I think I agree. At the very least it is a model which deserves to be more
widely discussed and considered than it has been; doing so will certainly be more
worthwhile than wasting time with fantasies such as TPP.

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About Me

I am Professor of Organization Studies at Royal Holloway, University of London, and was previously a Professor at Cambridge University and Warwick University. I am a Fellow of the Academy of Social Sciences (FAcSS). I originally studied Economics and Politics at Manchester University, where I also gained a PhD on the regulation of financial services. I blog in a personal capacity and all views expressed are mine, not those of my employer. My Brexit Blog is accompanied by a twitter feed @chrisgreybrexit. For media enquiries, contact Samantha.daynes@rhul.ac.uk